Stock investors got a gutcheck Monday when long-bond yields hit levels not seen since June 2004, when the Federal Reserve delivered what would be the first in a long series of rate hikes. Bond yields at 19-month highs might send such bearish signals that they could spark a near-term correction, several strategists predict. High fixed-income payouts compete with equities, and if the yield of the 10-year Treasury bond continues on its way to 5%, it could become an ever more attractive, risk-free alternative to stocks. The S&P 500 index, for instance, returned 4.9% in 2005, including dividends. On Monday, the benchmark 10-year Treasury bond fell 12/32, while its yield, which moves inversely, rose to 4.73%. Long-bond yields tend to rise on expectations of rising inflation. Stocks closed above their worst levels, but the bearishness was palpable as the market ignored declining crude-oil prices and a megamerger in the telecom industry. Crude oil dropped 2% to $62.1 per barrel on expectations that the Organization of Petroleum Exporting Countries won't cut production this month and amid hopes of easing tensions with Iran. News that AT&T ( T) reached an agreement to acquire BellSouth ( BLS) for $67 billion fired up the telecom sector, which is expected to see matching expansion from the likes of Verizon ( VZ). The Amex Telecom Index rose 1.53%. But the enthusiasm didn't spread to other sectors of the market, with investors nervously eyeing bonds. The Dow Jones Industrial Average dropped 63 points, or 0.57%, to 10,958. General Motors ( GM) bucked the trend after selling most of its stake in Suzuki Motors. The S&P 500 lost 0.7% to 1278 and the Nasdaq Composite lost 0.7% to 2286. Research in Motion ( RIMM) also bucked the trend after announcing Friday it would pay $612.5 million to settle its patent dispute with NTP.